NEW YORK, June 18 Two former hedge fund managers
persuaded a U.S. appeals court on Tuesday to allow them to
remain free on bail as they seek to have their insider-trading
convictions thrown out.

Todd Newman, a former portfolio manager at hedge fund
Diamondback Capital Management, and Anthony Chiasson, co-founder
of hedge fund Level Global Investors, had been set to begin
prison sentences later this summer.

The two were convicted in December of illegally trading in
Dell Inc and Nvidia Corp stock based on
non-public information supplied by research analysts.

After a hearing on Tuesday, the 2nd U.S. Circuit Court of
Appeals in New York granted their request to remain free on bail
while they pursued their appeal, which they argued raised
substantial issues under the law.

Chiasson, 48, and Newman, 45, have been free on $2.5 million
and $3 million bonds, respectively, since their arrests in
January 2012.

Newman was scheduled to begin serving his sentence on July 8
after a judge gave him a 4-1/2-year prison term in May. Chiasson
was set to begin serving on Aug. 13 after being sentenced to
6-1/2 years in prison.

The case raises legal issues of whether prosecutors at trial
must prove a recipient of a tip knew that the person who
provided the illegal information did so for a personal benefit.

Judges have disagreed on this point in recent cases.

Lawyers for Chiasson and Newman argued that in their case,
U.S. District Judge Richard Sullivan declined to instruct the
jury that the two men had to have knowledge of the alleged
benefit received by the tipper.

Mark Pomerantz, a lawyer for Chiasson, said the jury was
improperly instructed, affecting how the trial was conducted.

"The trial would have assumed an entirely different
dynamic," he said.

The same legal issue was recently raised in the case of
Michael Steinberg, a fund manager at SAC Capital Advisors who
was indicted in March on insider trading charges.

Steinberg, who is set to face trial on Nov. 18, sought
unsuccessfully to reassign his case to a judge other than
Sullivan on the basis of his ruling on the issue of tip
recipients in the Newman and Chiasson case.

In granting Newman and Chiasson's bail motion on Tuesday,
Circuit Judge Jose Cabranes said the appeals court would send
their case back to Sullivan for any bail modifications that
become necessary.

A spokeswoman for Manhattan U.S. Attorney Preet Bharara
declined comment.

The case is US v. Newman et al, 2nd U.S. Circuit Court of
Appeals, No. 13-1837.

Reuters is the news and media division of Thomson Reuters. Thomson Reuters is the world's largest international multimedia news agency, providing investing news, world news, business news, technology news, headline news, small business news, news alerts, personal finance, stock market, and mutual funds information available on Reuters.com, video, mobile, and interactive television platforms. Learn more about Thomson Reuters products: